Federal investigations of Hawaii institutions ‘unprecedented’

These are extraordinary times.

The number and breadth of current federal investigations into alleged corruption at Hawaii’s public institutions is unmatched in the state’s history, according to about a dozen former investigators, prosecutors, judges and others who have spent decades working in, documenting or observing the law enforcement arena in the islands.

“I’ve never seen it like this,” said Hawaii Pacific University assistant professor Randal Lee, who worked 25 years in the prosecutor’s office focusing on public corruption cases and a decade as a state judge. “It is unprecedented.”

“It’s shocking,” agreed Doug Chin, a former city prosecutor, state attorney general and lieutenant governor. “I think it’s a big wake-up call.”

No one contacted by Honolulu Star-­Advertiser could recall another time in which so many people with public or quasi-public institutions — from the police department and prosecutor’s office to labor organizations and the corporation counsel office — were under investigation by federal authorities for alleged wrongdoing while on the job.

They also couldn’t recall a time in which so many people at the top of the food chain were targets simultaneously of federal probes.

The former police chief. The city’s top prosecutor. Its top civil attorney.

All three have been ensnared in a multiyear federal investigation that is one of the largest public corruption cases in the state’s history.

The first of two trials scheduled in that case is set to start this month. Retired Police Chief Louis Kealoha; his wife, Katherine Kealoha, a former deputy prosecutor; and three former members of the Honolulu Police Department’s elite Criminal Intelligence Unit are facing conspiracy and obstruction charges. They have pleaded not guilty.

As part of the case, a former police officer pleaded guilty in 2016 to conspiracy and a current officer pleaded in January to disclosing confidential information to Katherine Kealoha. A Hawaii island firefighter last year pleaded guilty to conspiring with Katherine Kealoha to lie about their sexual affair. He agreed to cooperate with investigators.

Prosecutor Keith Kaneshiro and Corporation Counsel Donna Leong, who both received Justice Department letters saying they were targets of the corruption investigation, have not been charged. They are on leave pending the outcome of the investigation.

“Just the Kealoha stuff alone is unprecedented,” said Ken Kobayashi, a retired Star-Advertiser reporter who covered Hawaii’s courts for more than 30 years.

Also facing federal scrutiny: Oahu’s under-construction rail line, at $9.2 billion the largest public works project in the state’s history.

The FBI and the local U.S. Attorney’s office are investigating, and grand jury subpoenas for tens of thou­sands of documents have been issued to the Honolulu Authority for Rapid Transportation. The focus of the probe has not been disclosed publicly.

Federal authorities also are pursuing a bribery case linked to government agencies in Hawaii and Micronesia that already has resulted in guilty pleas from the president of a local engineering firm and a Micronesian official.

Frank James Lyon of Honolulu-based Lyon Associates, from around 2011 to 2016, paid about $240,000 in bribes to obtain a $2.5 million contract with a Hawaii government agency that has yet to be identified, according to court records. The company did business with multiple state and city agencies. The probe is ongoing.

In addition, federal authorities are investigating at least two Hawaii trade unions and the state Department of Public Safety.

And these are only the cases that have been made public through court documents and media reports.

With more investigations ongoing, new cases and suspects are expected to be revealed in the months ahead, according to attorneys for witnesses or potential suspects.

The FBI and the U.S. Attorney’s office here would not comment on pending cases, provide local statistics on corruption cases or address the widespread perception that the current scope of investigations is unprecedented. Both offices have policies of not confirming or denying the existence of specific investigations.

Sean Kaul, the FBI’s special agent in charge, and U.S. Attorney Kenji Price did provide the Star-Advertiser with general statements.

“If a federal law has been violated, the FBI will pursue an investigation and bring the perpetrators to justice, no matter who they are, what their position or who they know,” Kaul said. “If citizens believe that a local government is turning a blind eye, they can and should always report corruption allegations to the FBI.”

Kaul noted, however, that the vast majority of public officials “are honest in their work and committed to serving their fellow citizens.”

Price said: “Public officials have a duty to serve with the utmost integrity and professionalism. The Department of Justice has and will continue to combat instances of public corruption to help sustain what should be a fundamental public trust in these institutions.”

Willingness to report

Several attorneys, former prosecutors and others attributed the proliferation of federal cases to multiple factors, including that people are increasingly intolerant of unethical officials and are more inclined to report such behavior. And, they added, federal authorities in Hawaii seem to have a free hand to go after cases.

Lee, who served as a deputy prosecutor before becoming a judge in 2005, said public corruption always has been a problem here, but employees historically have reported lower-level managers or staff, not those at the top.

“In the past, you never got to that level,” he said. “People were kind of loyal to their job, to their supervisor and to their own self-interests.”

But a generational shift in attitudes has occurred, Lee added. “The culture has changed. People are demanding more transparency. And the laws protect you from retaliation and discrimination.”

A greater willingness to report corruption has been a national trend, and Hawaii is no exception, according to Jason White, the local spokesman for the FBI.

“We’re seeing that here,” he said. “A lot more people are coming forward.”

Nationally and locally, the FBI has made combating corruption its top priority.

Eric Seitz, a criminal defense lawyer, said the proliferation of federal investigations in Hawaii underscores the unwillingness or inability of some local agencies to monitor themselves – even when legitimate concerns are raised.

“We have been up to now incapable of policing ourselves,” Seitz said.

‘It just keeps unraveling’

Others also cite the greater expertise, resources and independence of the federal government to conduct such investigations. Given the close-knit relationships among state and city agencies, federal investigators bring a greater measure of objectivity and can draw on a larger pool of resources, they add.

“I don’t necessarily see it as the feds being superior,” said Chin, the former prosecutor and attorney general.

The Kealoha case is being handled by federal prosecutors from San Diego.

The complicated nature of white-collar crimes often means that investigations can take several years. They frequently branch out in multiple directions as more evidence is uncovered.

“These things are organic,” said Steve Alm, a former deputy prosecutor, U.S. attorney and state judge. “One thing often leads to another.”

The Kealoha case started as an investigation of a reported mailbox theft. The Kealohas and several police officers were accused of framing Katherine Kealoha’s uncle for the alleged crime. At the time, Kealoha and her relative were engaged in a family dispute over money.

The federal probe has since mushroomed, snaring more suspects and generating additional allegations, including drug dealing and bank fraud.

“It’s like peeling an onion,” said Ken Lawson, co-director of the Hawaii Innocence Project at the University of Hawaii’s William S. Richardson School of Law. “It just keeps unraveling.”

The complex nature of corruption cases also means experts sometimes have to be brought to Hawaii to help, and the federal government typically has more resources to do that and more experienced prosecutors to handle the time-consuming, resource-intensive investigations.

When Alm and his team at the U.S. Attorney’s office pursued the prosecution of former labor leader Gary Rodrigues, a mainland expert on labor racketeering came to Hawaii for two weeks each month for three years to assist with the case, according to Alm.

Rodrigues was convicted of conspiracy, embezzling union money, money laundering and health care fraud in 2002.

In pursuing allegations involving multiple players, it is not uncommon for authorities to go after lower-level suspects or those alleged to have committed lesser offenses, looking to use leverage from those prosecutions to strengthen cases against additional or higher-ranking targets.

Unions under scrutiny

Some attorneys cite the ongoing, multiyear federal investigation of the International Longshore and Warehouse Union Local 142.

A plea deal and an indictment earlier this year involving two former officials of that union are an indication that authorities are continuing a broader probe, according to attorneys familiar with the cases.

Nate Lum, former director of the union’s longshore division, reached a deal with federal prosecutors in March, pleading guilty to aggravated identity theft and one count of failure to file his federal income tax return. In exchange, the government dropped six other charges, including theft of public money, the most serious one. A conviction on the latter charge would have meant a maximum prison term of 10 years.

Lum, who now faces up to two years in prison for the theft charge and an additional year for failing to file his tax return, admitted that between August 2013 and January 2016, he deposited into his bank account about $33,400 of Social Security checks intended for his father, who had died before that period, according to the plea agreement.

Less than a month after that deal was struck, Charles Kimo Brown, the former secretary-treasurer of the longshore division, was indicted for allegedly embezzling about $1,500 from the union. He pleaded not guilty to two counts each of embezzling union funds and falsifying financial records.

“This is just the tip of the iceberg,” said an attorney who asked not to be named because of the sensitivity of the cases.

Among the allegations investigators are pursuing in the ILWU case is that new stevedores in some instances had to pay up to $60,000 in cash to work at the docks, the attorney said.

The feds also are investigating the International Brotherhood of Electrical Workers, though no one has been charged in that case. They are examining spending and other matters related to the electrical union.

Seitz, the defense attorney, has four potential cases linked to investigations and said lately he has been in contact with federal authorities at least weekly. “That has never happened before in my life.”

Chin, the former prosecutor, said he sympathizes with all the dedicated, ethical employees at the various government agencies under investigation. They have to deal with the extra work and public criticism that such scrutiny brings to their workplace, he added, while trying to do jobs that already are tough enough.

“I always feel bad when they get drawn into what’s happening above them,” Chin said. “These (cases) take up a lot of bandwidth.”

But the message being underscored by all the corruption investigations is unmistakable, according to Chin and others: If you abuse the public’s trust, the consequences can be severe.

A HISTORY OF CORRUPTION

Here are some high-profile public corruption cases federal authorities prosecuted in Hawaii in recent decades:

Gary Rodrigues

The former state director of the United Public Workers union was convicted in 2002 of conspiracy, embezzling union money, money laundering and health care fraud. He served more than four years in prison.

Andy Mirikitani

The city councilman was sentenced to 4-1/2 years in prison in 2001 for theft, bribery, extortion, wire fraud and witness tampering. He offered bonuses to two aides and received kickbacks from them.

Daniel Kihano

The former state House speaker was convicted in 1997 of money laundering, obstruction of justice and filing a false income tax return after he diverted $27,000 from his campaign fund for personal use. He was released from prison in 1999 because of poor health and died the following year.

Milton Holt

The former state senator in 1999 pleaded guilty to mail fraud as part of a plea agreement after he was accused of using campaign funds for personal use. He served about six months in a mainland prison.

Nathan Suzuki

The former state representative was sentenced in 2005 to three years in prison for conspiring with a Honolulu businessman to defraud the IRS by setting up offshore corporations and bank accounts to avoid tax liability.

Multiple agencies: More than 35 people were indicted in the mid-2000s as part of a massive wiretap operation sparked by the discovery that an FBI clerk was using her access to confidential information to tip off drug dealers. The suspects included the clerk, five police officers, a Honolulu liquor inspector and the Aloha Stadium security chief. Three of the officers were convicted of trying to protect an illegal gambling operation, the clerk was convicted of tapping into a federal database without authorization and the inspector and security chief pleaded guilty to charges related to extorting owners of two bars.

Honolulu Liquor Commission: Eight inspectors were indicted in 2002 for accepting bribes from bar owners in exchange for not enforcing liquor laws. All eight were convicted.

Source: Court documents, media reports